Tech stocks fall amid uncertainty

CarlCorry

NEW YORK (CBS.MW) -- Technology issues fell Wednesday amid uncertainty of who would be elected the next U.S. president and continued concern over future results in the sector, analysts said.

That uncertainty pushed the tech-laden Nasdaq Composite down 5.4 percent to 3,232.85 in recent trading. The Philadelphia Semiconductor Index
SOX, -0.19%
continued to slide for the second day, dropping 7.1 percent.

Microsoft
MSFT, +1.25%
one of the few gainers in the tech sector earlier in the session, fell 1.5 percent to $69.44.

Tech investors had picked up shares of Microsoft earlier in the session in apparent anticipation that Republican George W. Bush will pull out a victory in the U.S. presidential race, which is still too close to call.

Epifanio said this success, both on the server and desktop level, would be reflected in the company's December quarter.

Microsoft's shares rose at one point to $72.38, a level that hasn't been seen since Aug. 14.

Investors believe that a Bush-led administration would be more lenient to antitrust issues, which would bode well for the high-tech behemoth.

America Online
AOL
which is trying to close on its acquisition of Time Warner
TWX, -28.57%
could similarly benefit from a less harsh regulatory atmosphere.

AOL shares slipped $1.31 to $56.30.

The presidential race between Bush and Vice President Al Gore hinges on the outcome of the Florida election, in which Bush led by 1,785 votes. The margin is so small that the state is conducting a recount; Florida's secretary of state said it will be completed Thursday.

Chip stocks continue decline

This uncertainty, as well as the general concern about future earnings in the tech sector, drove down stocks like networking giant Cisco Systems and its semiconductor suppliers.

Epifanio, at J.P. Morgan, noted that Oracle
ORCL, +0.46%
investors are heading for safety to Microsoft, reversing a trend that started last year. Shares of Oracle, the No. 2 software maker, lost 6.6 percent to $24.81.

Shares of Broadcom
BRCM
which lost $42.50 to $175.50 on Tuesday, fell another $24.69 to $151.81. PMC Sierra
PMCS
another big loser Tuesday, fell $19.19 to $108.69.

Cisco shares were down 8.1 percent to $52.13.

E-tailers fall on Merrill ratings cuts

Merrill Lynch analyst Henry Blodget lowered both his intermediate- and long-term ratings on Buy.com
BUYX
and Webvan
WBVN
to "neutral" from "accumulate," and cut his L-T rating on Etoys
ETYS
to "neutral" from "accumulate." Etoys' I-T rating remains at "neutral."

Blodget said that the inability of e-tailers such as Pets.com
IPET
and Mothernature.com
MTHR
to raise additional capital, forcing the wind-down of their operations, "continues to highlight how difficult it is for capital constrained e-tailers to raise money necessary to reach profitability."

Blodget said companies will be able to raise additional capital as needed, but believes there is a risk. Etoys slipped 78 cents, or 23.4 percent, to $2.56. Buy.com fell 28 cents, or 14.5 percent, to $1.66. Webvan shed 31 cents, or 18.5 percent, to $1.38.

A bright spot

CE Unterberg Towbin upgraded Natural Microsystems
NMSS
from a "buy" to a "strong buy" a day after the communications software maker reiterated its fourth-quarter earnings guidance.

The Framingham, Mass.-based firm said that it expects fourth-quarter earnings to grow 10 to 12 percent from the third quarter, with growth moderating to about 5 percent in the first quarter of next year.

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